Randall Enterprises is considering a capital expenditure proposal that will cost $20,000 and yield an expected after-tax

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Randall Enterprises is considering a capital expenditure proposal that will cost $20,000 and yield an expected after-tax cash inflow of $5,000 each year for 6 years. There is no expected salvage value at the end of the life of the project. The after-tax net cash inflows for each year are expected to be normally distributed with a standard deviation of $800. The company's weighted-average cost of capital is 10%.
Required:
Compute the expected net present value of the capital expenditure proposal. Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Cost Accounting

ISBN: 978-0759338098

14th edition

Authors: William K. Carter

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